In an exclusive interview, J R Bangera, President of Federation of Karnataka Chambers of
Commerce and Industry (FKCCI), threw light on the conditions of the SMEs
in the state of Karnataka and also how his association aims to
strengthen trade at the international level.
What is the role that your association aims to play in Karnataka's industrial sector?
JR Bangera: We are hoping to promote international trade through
meetings with visiting foreign business delegations, participation in
trade fairs/exhibitions and business delegations abroad. Our association
offers expert advice on diverse subjects such as industrial growth,
monetary and fiscal policy, exchange rate policy, economic planning,
taxation and corporate laws. FKCCI has got more than 30 expert
committees, which regularly takes up issues of its members' interests in
various fields with the policy makers. We also review general/common
problems of members at central/state government levels. We provide
assistance in identifying joint venture partners at various national
level events, organised by FKCCI. We are engaged in certification of
export documents including Certificate of Origin, Visa Recommendation
Letters for business promotion visits abroad. Our association disburses
information services to entrepreneurs, who are either setting up new
projects or looking for technological up gradation. Moreover, executive
developmental programmes with special focus on Human Resources and
Labour/Industrial Relations are initiated at regular intervals. We have
been holding regular interactions with government to resolve the various
problems that arise from time to time in the business and economic
spheres. From the last few years, FKCCI has been playing the role of a
forum for business missions from abroad for developing bilateral
trade/multilateral trade with foreign countries and to sponsor business
missions.
What are the current projects being undertaken by your association?
JR Bangera: With the aim to encourage, boost exporters of
Karnataka for their contribution and outstanding performance in the
field of exports annually, we are organising workshops on themes such as
'Going Global – Meeting Challenges', update on KVAT and e-Initiatives
of Commercial Taxes Dept.
What is the current scenario of the industrial sector in the state?
JR Bangera: The growth rate of the industrial sector is
estimated to have decreased to 3.6% during 2011-12, largely due to
adverse impacts of the overall economic slowdown. The state’s economy
was expected to grow at 6.4% and reach Rs 2,97,964 crore in 2011-12 from
Rs 2,79,932 crore in 2010-11. Karnataka’s economy is showing
encouraging trends due to the strong services sector, which grew by
10.6% during 2011-12. However, there has been slowdown in the
agriculture and allied sectors (minus 2.9 % in 2011-12) attributable to a
decline in crop area due to drought and floods, according to the
Economic Survey. Are the exports placed aptly for the SMEs in the state? JR Bangera:
The contribution made by MSME sector to the state’s export is nearly
40%. Information technology, readymade garments, jewellery, engineering,
electronics, processed food, handicrafts, agarbathies are some of the
sectors, where maximum exports have been achieved by the small scale
industries.
What is the performance of domestic market for these SMEs?
JR Bangera:The recent recession had taken its toll on the MSME
sector in Karnataka. The worst affected sectors, that depended on
exports, are textile and precision manufacturing sectors. The good news
is that the domestic market provides a cushion and have become more
efficient today.
Do you feel that government policies (both centre and state) are
working in favour of the SMEs? Are they assisting these companies in
alleviating the pertinent issues?
JR Bangera:According to me, few policies are in favour such as
cluster approach for development, marketing support – price preference,
reservation of 20% land in large industrial areas, performance linked
investment promotion subsidy, interest subsidy for micro manufacturing
enterprises, exemption from electricity duty, incentive for technology
upgradation/quality certification, subsidy for water
harvesting/conversation & energy. On the other hand, the SME traders
in Karnataka are facing huge financial losses in their businesses due
to the problem of load-shedding. It is believed that manpower crunch is a key issue at the moment for SMEs. How do you view it and what are the solutions? JR Bangera:
In the state, there is acute crisis of skilled manpower. Manpower
shortage is acting as a big problem for those SMEs which have matured
and are willing to grow further. Few of the solutions to this problem
are to offer funding to help SMEs in increasing worker training,
promoting free expertise schemes, conducting skill development
programmes.
Can you throw some light on the ICT (information and communication technology) used by SMEs in the state?
JR Bangera: The problem is that most of the MSMEs are not using
ICT effectively may be because of cost or non-availability of skilled
man power to use the technology. However, now MSMEs in Karnataka are
adopting newer technologies due to globalisation and also the
possibility of opening of international market for which they have to
display their online presence in the global market. It has been found
that Internet application usage among MSMEs has increased considerably.
MSMEs use Internet to run their own website, promotion of their
products/services online. According to me, nearly 50-60% of SMEs are
using Internet to promote their products/services online.
In the past six months, what are the achievements of the SME sector in the state?
JR Bangera: During April-Dec of 2011, 1,4578 units have been
registered with an investment of Rs 1,10,732 lakh and providing
employment to 90,203 people. Out of this, 13,601 are micro units, 952
small and 25 medium industries have been registered with an investment
of Rs 30,388.21 lakh, Rs 63,867.79 lakh, and Rs 16,476 lakh,
respectively and providing employment to 60,455, 24,382 and 5,366
people, respectively.
Kindly share the roadmap of your Federation for this fiscal.
JR Bangera: We want to widen the membership base, develop
contacts at grass root level in the state, work closely with the
government and advice government on various policy initiatives for the
development of the MSME
sector.
What is the outlook for the SME sector in this year?
JR Bangera: Due to the contraction in the European and the US
markets, the demand of goods and services from the emerging markets has
slowed down considerably. This in turn has negatively impacted the
Indian manufacturing and services sectors. Indian SMEs operating in
these sectors have got negatively impacted due to this slowdown, coupled
with high inflationary pressures which increased the cost of raw
materials and other input costs. But, it is expected that by government
interventions with favourable policies and schemes, it may minimise the
cost of techonology upgradation. It will lead to promotion of market
penetration and also offer assistance in procuring raw materials or
inputs at low cost.
S&P lowered the outlook for India to negative. Do you think it will effect Indian SMEs?
JR Bangera: Considering the global ratings agency has downgraded
the credit rating for several important NBFCs and banks, there are
ample reasons for India Inc to be concerned, especially SMEs. Also, on
the list of organisations whose credit rating has been downgraded are
some large IT firms. S&P credit analyst Takahira Ogawa said in a
note that the revision of the credit outlook for India considers the
fact that any of the three factors (which are mentioned later) are
likely to impact the industry. Firstly, if the international scenario
continues to deteriorate; secondly, if the growth prospects diminish;
and finally, if slowdown is witnessed in fiscal growth due to weak
political setting. The downgrade by S&P, though brushed aside by
some experts, is likely to effect the economy in certain ways. Firstly,
it will effect the minds of the overseas investors, who are likely to
reconsider investing in India. Secondly, foreign investors who have
already invested in India are likely to exit at the next available
opportunity. Apart from this, the downgrading will increase the cost of
credit sourced from abroad for India as a whole as well as other
organisations opting for overseas loans.
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